Spring 2005
Featured Article

Insuring Real Life

By Robert B. Friedland, guest editor

When we are young, the future is one of remote dreams. When we are older, the past seems like yesterday, and many of our dreams have become realities. Going from dream to reality requires planning, hoping, and good fortune. Of course, life is full of contingencies, detours, missteps, and bad luck. Only in retrospect do we know how far we have come. Did we make the right educational, career, employer, investment, and health-plan choices? Did we save enough?

The Great Depression was a good example of bad luck for nearly everyone. The Depression profoundly a ff ected individuals, families, communities, and the nation. The Depression also underscored how, despite all of our hopes, dreams, and best planning, a good job and a lifetime of savings could be lost within a very short period of time. The fact that individual responsibility was not always sufficient to mitigate unforeseeable contingencies helped to usher in the beginning of a system of social insurance programs. Key components of this system, and the primary focus of this issue of Generations , are the Old-Age, Survivors, and Disability Insurance programs, more commonly called Social Security and Medicare. Layered within these social insurance programs are other key programs of income security and healthcare, the largest of which include Supplemental Security Income (SSI) and Medicaid.

Collectively, these programs have been an astounding success. They have provided older people full access to healthcare and effectively kept millions of families--of all ages--from destitution when a wage earner dies, becomes totally disabled, or stops working late in life. The programs have also enabled at least two generations of older people to avoid having to move in with their children. In short, they have affected beneficiaries and their families and communities in many important ways.

Unfortunately, however, these public programs--which were intended to be a base upon which to build stronger income security through savings, pensions, and private insurance--have not fully emancipated older people from the risks of financial catastrophe. Far too many older people are one or two bad events away from destitution. Substantial out-of-pocket costs for healthcare and long-term care are among the contingencies that compete with the cost of living.

Public opinion surveys dating back to the 1940 s have consistently shown that a majority of people lack confidence in the future of the programs. Large proportions of the public have only a rudimentary understanding of either how these programs work or what they cover. Nevertheless, despite their lack of confidence, most people want these programs to be there and to cover more. Most people strongly recognize the value of these programs. Social Security and Medicare are among the few--perhaps the only--parts of government in which people consistently volunteer to pollsters their willingness to pay more in taxes to avoid seeing benefits cut (Friedland, 1994 ; Reno and Friedland, 1997 ). Historically, this willingness to pay more is even more strongly expressed by the adult children of beneficiaries, suggesting that they see the value of their parents' financial independence.

Better understanding of how these programs work might help to relieve the public's anxiety. But some anxiety is natural, given how much we count on the programs to be there. The fact is that current obligations might not be met without raising tax rates in the future. Consequently, in lieu of tax increases, there is indeed a chance that future benefits will be cut.

And of course, much of the anxiety about these programs is enhanced by the political circumstances in which they exist. They are in the hands of an ongoing political process that includes very different perspectives about fundamental beliefs in the role of government. Competing programmatic goals within social insurance structures and competing ideologies about the role of government have ensured that these programs will always be changing and will in all likelihood always be complicated. Shaping the crucial compromise through a political process requires political leadership. Political leadership often requires permission from the public to lead. Hence we saw President Bush aggressively lobbying the public about the fiscal crisis in Social Security. By educating the public, he was helping to give Congress permission to take leadership on reforming the program. Other leaders and organizations however, look at the same set of facts and make an alternative set of arguments. It is too soon to know how this will play out through the political process--a process which, in many ways, has only just begun.

Social Security and Medicare are integral to our lives and are a part of who we are as a society. The current financing truly binds one generation to another and one community to another across this country. Workers are primarily financing beneficiaries. In this sense, it is incumbent on future beneficiaries to focus on the education and employment opportunities of all future workers. The goods and services produced by American workers are reflective of our nation's wealth, and so in a very explicit way, Social Security and Medicare constitute a mechanism for current workers to share the gains in their wealth with those who helped them achieve this wealth. Over a lifetime, as we move from child to worker to parent, we are all connected through these programs in ways that are consistent with our roles both as adult children and as parents.

The political struggle involves difficult choices that will affect us as parents and as adult children. At the heart of this struggle is determining how much of the nation's future wealth should be shared in ways that are consistent with our views of the role of government.

References

Friedland, R. B. 1994. When Support and Confidence Are at Odds: The Public's Understanding of Social Security. Washington, D. C.: National Academy of Social Insurance.

Reno, V., and Friedland, R. B. 1997. "Strong Support But Low Confidence: What Explains the Contradiction?" In E. Kingston and J. Shulz, eds., Social Security in the 21 st Century. Oxford: Oxford University Press.

From Generations Spring 2005 issue, 29(1): 62-63. © 2005 American Society on Aging

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